Celebrate Friedman’s legacy: Go to bat for school choice this Thursday @ Louisville’s Slugger Field!

LSC(Dick's)If you haven’t registered for the Bluegrass Institute’s 225px-Portrait_of_Milton_FriedmanFriedman Legacy Night at Louisville’s Slugger Field, 401 E. Main St., this Thursday, July 30, you may still do so here.

While Dr. Milton Friedman won the Nobel Prize for economics, he and his wife Rose Friedman dedicated much of their lives and treasure to championing the cause of educational liberty, particularly in promoting school choice for children from low-income families.

Join us for a fun night of baseball, food, fellowship and school choice! It all begins at 6:30 p.m. We will answer your questions about the performance of Kentucky’s public-education system and the need for school choice in the Bluegrass State.

One of the characteristics of Dr. Friedman’s life that has always impressed me is that while he was a great champion for freedom who was very effective in making the case for free markets and free people, he also enjoyed his journey.

So, we the Institute thought it would only be appropriate this year to celebrate the life and legacy of this happy warrior for freedom by having fun while we promote the great cause of school choice in Kentucky.

Again, you may register here.

See you at the ballpark!

BIPPS Scholar on ‘Kentucky Tonight’ @ 8 p.m. today

Western Kentucky University economist Brian Strow, Ph.D., a member of the brian strowBluegrass Institute Board of Scholars, Kyresizedwill appear as part of a panel on jobs and wages on KET’s Kentucky Tonight at 8 p.m. EDT tonight.

Renee Shaw will host tonight’s program, which is available live online here and will be rebroadcast on KET, KET KY, and radio.

Joining Strow on the program will be Julia Crigler, state director of Americans for Prosperity, Caitlin Lally, communications director for United Food and Commercial Workers Local 227 and Jason Bailey, executive director of the Kentucky Center for Economic Policy

Strow recently released this report on the negative impact that increasing the minimum wage would have on Kentucky jobs and opportunities – especially for younger Kentuckians.

Bluegrass Beacon – Transparency: the best medicine for 340B drug-pricing program

BluegrassBeaconLogoIf ever a well-intentioned government program was trusted too much and verified too little, it’s the 340B Drug Pricing plan created by Congress in 1992 to help indigent and uninsured patients acquire costly prescription medicines.

The policy forces manufacturers to sell those drugs to participating hospitals at reduced rates; some price at more than 50 percent below retail.

However, a lack of proper oversight combined with passage of the Affordable Care Act has resulted in a collusion between big hospitals, big pharmacies and big government, causing an explosion in the size of 340B.

More than 14,000 facilities have signed up despite the fact that 340B was initially meant to serve only about 90 safety-net hospitals and clinics. Spending on 340B ballooned from $1.1 billion in 1997 to more than $7 billion in 2013 and is projected to reach $16 billion by 2020.

The 340B cabal seems to force one industry – drug manufacturers – to subsidize huge profits of hospitals and big-chain pharmacies that likely don’t provide direct benefits to vulnerable and uninsured patients, at least not in proportion to the savings the facilities squeeze from makers.

Participating hospitals simply aren’t required to reveal enough relevant data needed to determine whether they use the 340B program as Congress intended or merely to enhance their bottom line.

A congressional hearing was finally held in March after a growing chorus of voices – including mine in a column last year – criticized Congress for failing to hold a single oversight hearing in the 22 years since 304B’s creation even though the Health Resources Services Administration (HRSA), the program’s oversight agency, admitted more accountability is needed.

But an effective prescription will involve more than tepid talk.

Answers are needed for fundamental questions, including the most-obvious one: Should hospitals offering extremely low percentages of charity care even be allowed to participate in the 340B program?

It doesn’t take a brain surgeon to suspect hidden, costly maladies and seek a second opinion on the condition of the program at places like Duke University’s rich hospital, which, according to a four-page letter to the HRSA from Sen. Charles Grassley, R-Iowa, reported 340B profits of $463 million between 2009 and 2012 while treating no more than 5 percent charity cases in any of those years.

While some Kentucky hospitals and clinics seem to correctly use the program by caring for large percentages of 340B patients, it’s certainly questionable whether others are passing on to vulnerable and needy patients the savings they receive – much less whether they even qualify for participation, considering how small a percentage of their overall revenues are devoted to charity cases.

For instance, there’s a stark difference in Louisville between University Hospital, where, according to the Centers for Medicare and Medicaid Services, charity cases comprised nearly 10 percent of their patient load in 2014, and Norton Healthcare, which, despite $1.5 billion in revenues and 53 contracted pharmacies, reported less than 1 percent of vulnerable patients.

Still, both are considered “Disproportionate Share Hospitals,” allowing them to purchase highly discounted 340B medicines.

We also see such disparities in other parts of Kentucky.

Charity cases in 2014 comprised more than 9 percent at St. Joseph Hospital in Mt. Sterling but less than 0.5 percent at T.J. Samson Community Hospital of Glasgow and The Medical Center of Bowling Green, which reported $125 million and $285 million in revenues, respectively, during that same year.

Yet all three hospitals claim to serve a “disproportionate” share of indigent patients and are eligible to participate in 340B.

What’s needed are disproportionately large doses of transparency to help determine whether 340B hospitals are, in fact, passing manufacturers’ savings on to enough needy patients.

Some unquestionably are; others undoubtedly profit in big ways from failing to do so and should be rendered ineligible for further participation in the 340B program.

Jim Waters is president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at jwaters@freedomkentucky.com. Read previously published columns at www.bipps.org.

Bluegrass Beacon: Overtime rules, faulty assumptions

BluegrassBeaconLogoI asked reporters who contacted me for comment regarding President Obama’s proposal to more than double the salary threshold for those getting overtime pay – from $455 to $970 – whether they also planned on including in their stories the number of people who could suffer financial harm by such a move.

They can’t.

No one knows, including the President and his supporters, who – in the same way – cannot back their claims that this policy will help millions of Americans and tens of thousands of Kentuckians.

Wouldn’t any thoughtful analysis of a mandate that could, according to the National Retail Federation, cost businesses $5.2 billion a year at least acknowledge that while some people may indeed be helped by such a policy, a downside does exist?

But proposals like this aren’t about careful economic analysis. Rather, they’re driven to appeal to a partisan emotionalism.

Otherwise, Obama’s labor-department prognosticators would acknowledge what any Econ 101 student at the University of Kentucky knows: When a tax or regulation is enacted, a process almost subconsciously kicks in whereby those most affected by such government coercion begin searching for ways to avoid paying Uncle Sam’s subsidized piper.

A stark example of this occurred when President George H.W. Bush agreed to raise taxes despite his famous “read my lips: no new taxes” pledge during the 1988 Republican National Convention.

Bush eventually compromised with congressional leaders.

Both sides agreed that raising taxes on items like aircraft, jewelry and luxury yachts would produce some quick revenue and not harm middle-class Americans because those are items generally purchased by wealthier people.

Like Obama’s labor gurus assume that employers will not adjust to avoid his increased labor “taxes,” Bush and Congress apparently assumed no change would occur in the purchasing practices of wealthy Americans despite the tax hikes.

You do know what assumptions make out of us, don’t you?

Instead of raising more money to effectively address the deficit, Bush’s plan backfired as the aircraft, jewelry and yacht industries laid off middle-class Americans who manufactured these items.

In the end, more money was paid out in unemployment benefits than was received in new tax revenue.

It might be worth noting for our progressive friends: wealthy individuals and companies don’t bear the brunt of tax increases or government wage mandates.

They simply pass the cost and consequences on in the form of pink slips for workers, reducing salaried managers to hourly workers and higher prices for customers – all of which negatively impacts the very people they design such policies to assist.

On the other hand, reducing government interference in the marketplace and increasing incentives for entrepreneurship – which was accomplished by welfare-reform legislation passed by a politically divided federal government in the 1990s, among other economic acts in recent history – can refuel and spark an economic recovery.

The Obama administration uses current employment numbers of salaried workers to support its claim that its new overtime rules will result in bigger paychecks for 4.7 million Americans, including 70,000 Kentuckians.

This assumes that employers don’t carry through with plans like those expressed by David Douglass, CEO of Nashville-based Back Yard Burgers, Inc., whom the Wall Street Journal reported was trying to “figure out an arrangement” that places many of currently salaried general managers on hourly pay “so their total compensation doesn’t increase significantly, even accounting for overtime.”

If that could happen to salaried general managers, what might be in store for Kentuckians who are hourly employees but who dream of a brighter future with a salary and an opportunity?

Jim Waters is president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at jwaters@freedomkentucky.com. Read previously published columns at www.bipps.org.

Kentucky college readiness tests being phased out

Progress checks on Common Core being lost!!!!

To my great dismay, the Kentucky Department of Education has announced it will not administer the ACT Inc.’s EXPLORE and PLAN tests in the fall of 2015, ending use of this important, well-established set of college readiness tests a year ahead of schedule. Kentucky used EXPLORE to test all eighth grade students and PLAN to test all tenth graders since the 2006-07 school term. The state has rich trend lines for all of its middle and high schools from these college readiness tests.

The COMPASS, yet another ACT college readiness test used in Kentucky, is about to bite the dust as well.

One has to wonder, if Common Core is supposed to be about college readiness, why is the ACT ending so many college readiness tests?

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Kentucky Tonight Follow-Up – How do Kentucky’s taxpayers really perform for education?

I was pleased to participate in a recent Kentucky Tonight broadcast on KET along with Kentucky Senator Mike Wilson, Kentucky Representative Derrick Graham, incumbent head of the Prichard Committee Brigitte Blom Ramsey and guest show host Renee Shaw (show online here). We had a lively discussion about many education issues that are likely to come up in the 2016 session of the Kentucky legislature.

One surefire subject was education spending in Kentucky. I mentioned on air that once you consider the Kentucky taxpayer’s ability to pay, Kentucky is actually doing a better job than most states in supporting public education. Let’s look at that a little more closely.

The best resource for comparing state-to-state education expenditures comes from an annual publication from the US Census Bureau. The latest edition, which just came out in June of 2015 is “Public Education Finances: 2013.” Earlier versions of the same document have a similar title except for the year.

Within each of these documents is a table, Table 12, which has a rather complex name like, “States Ranked According to Relation of Public Elementary-Secondary School System Finance Amounts to $1,000 Personal Income: Fiscal Year 2013.” Decoded, this is basically a ranking of how much states spend compared to the ability of that state’s taxpayers to pay. This table helps to even the playing field for states like Kentucky where the taxpayers actually do a relatively good job of supporting education given their financial ability to do so.

The graph below shows how Kentucky ranks among the 50 states and Washington, DC for taxpayer support for schools. In this table, a lower number shows better performance.

Kentucky's Rank for Education Finances Vs. Taxpayer Ability to Pay

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Still more school finance corruption!

On June 29, 2015 the Ashland Independent reported in “Auditor blisters Fairview school in report” that yet another case of improper use of school funds – this time in the Fairview Independent School District – is being referred to law enforcement and the Kentucky Educational Professional Standards Board, an indication of the seriousness of the findings.

Per the Independent, inappropriate funding actions found in the special audit included moving money from the general fund to the activities fund, especially to fund the male football program at the expense of general education activities in the district. The auditor says this football funding action probably violated federal Title IX legislation that says male and female athletics must receive the same funding. The article says the special audit provides additional information that this violation of Title IX might have been willful.

Of interest to taxpayers, while the district allowed the football team to run up an operational deficit which was later covered by the apparently inappropriate fund transfers, taxpayers were hit with a major increase in local school taxes.

There are also findings that the district’s superintendent used a district credit card for personal purchases and engaged in other questionable activities including using intimidation.

This latest State Auditor report adds to cases from the Dayton Independent School District and the Mason County School District which have seen one former superintendent sent to federal prison and another facing court in a few months.

As the State Auditor has continuously pointed out, the activities uncovered are damaging education. They need to stop.

It’s Official: The Feds Will Collect Psycho-Social Data On Your Child

The Federalist has a major article out about US Government plans to go well beyond academic testing of the country’s children. It’s a very disturbing thought-provoker.

Apparently, the National Assessment of Educational Progress, often called the Nation’s Report Card or the NAEP, will be one collection vehicle for this new material even though the article claims present laws about this federal assessment program prohibit it from collecting such data.

Please provide your comments on this one.

Do Kentuckians really overwhelmingly support the Common Core State Standards?

The Kentucky Department of Education started something called the Kentucky Core Academic Standards Challenge about 10 months ago.

The Challenge was supposed to collect comments from the public about the Kentucky standards, which are basically just cut-and-paste adoptions of the Common Core State Standards.

Now the department has issued News Release 15-066 with the title, “KENTUCKIANS STRONGLY SUPPORT CURRENT ACADEMIC STANDARDS.” The article says:

“Overall, 88 percent of the respondents gave the standards a ‘thumbs up’ and did not indicate any changes were needed.”

But, can this really tell us what the average Kentuckian thinks about the Common Core?

The response to the Challenge was in no way a valid random sample of Kentuckians. Instead, only those interested made comments to the department. Biases in this sample of Kentuckians are obvious.

The news article says the department got 4,000 responses, about half from teachers. Another 8 percent of the total submissions came from school administrators.

According to the US Census, 4,399,583 people were living in Kentucky in 2013. About 23.1 percent of them were under the age of 18, which works out to about 1,016,303 under age residents. So, there were about 3,383,280 adults in the state that year.

According to the Kentucky Department of Education, in 2013 the state had 43,767 teachers.

So, teachers only comprised about 1.2 percent of the state’s total adult population but made up about half of the Challenge respondents.

Clearly, the news release’s title is seriously misleading. The department does not have sufficient evidence to draw any conclusions about what Kentuckians think. In fact, with only about 2,000 teachers responding, we only know about the opinions of around 4.6 percent of our teachers. Maybe the others are happy; maybe they are not. And, maybe other teachers are too afraid to speak out.

One more thing: The rules for the Challenge were clear, and restrictive. They only allowed for comments to change specific standards, not to make massive changes or to throw out the whole set of standards. Furthermore, the separate, and controversial, science standards were not even open for comment.

So, those who had major disagreements with the standards probably didn’t even bother to reply to this biased program, which really makes the title of the news release inaccurate.

Kentucky’s dropout law’s unintended consequences

No, I didn’t write the recent Kentucky Enquirer article with this title, “Kentucky’s dropout law has unintended consequences.” I didn’t even talk to the reporter who wrote it.

But, we’ve been pointing out problems with the idea of forcing the unwilling to stay in school until they reach 18 years of age for several years. Now, it looks like some chickens are coming home to roost with this dubiously crafted Kentucky law.

One specific problem at issue in the news article is forcing students who dropped out under the old Age 16 rule to now return to school until they reach Age 18. These kids are now way behind and probably won’t be able to make up what in many cases is a crushing credit hour deficiency.

But, the law didn’t include any grandfathering, so those kids not yet 18 years old will be breaking the law if they don’t show up for school when the next term starts.

I hope nothing worse comes from this than disgruntled kids stuck in classrooms where they won’t pay attention but probably will grow still more hostile to the school system they already left – once.

How much better things would be if kids who dropped out were really given hope and encouragement that they can make it if they return to school. That sort of encouragement doesn’t seem to be happening with the young lady from Boone County that the article talks about, unfortunately. What makes this worse is that Boone County is actually far better run, in my opinion, than lots of other school systems in the state. So, if Boone County isn’t making things enticing for the about-to-be-forced-back dropouts, I can only imagine what is happening elsewhere around the state.